Skins (SKNN.OB)

Dear Bottarelli Research Member,

Before I begin, I’d like to once again reiterate owing the protective DJX October 126 Put (DJW VV) position from our August 24^th alert. As you can see from today’s intra-day 270-point sell-off, it still looks like we’ll see one more thrust to the downside, so make sure you own some protection! If you recall, we entered these puts for $1.60, and since then they’ve traded as high as $2.60. That’s a really nice 62% gainer in the midst of a down-market, so if you have yet to buy these puts, I recommend taking a small position next week. After all, it makes a lot of sense to insure yourself against any coming market drops (like today), and these puts will gain value as the Dow moves lower. Now having said that, let’s dive right into this week’s newest pick.

Trading for only $1.60 per share, this is a company that you’ll be able to put both feet into (pun intended, as you’ll see below). This unique little gem is just now gearing up to launch their game-changing product in retail stores this fall, and after some extensive due diligence, I believe that we now have the opportunity to get in right on the ground floor.

The initial results from customers have been overwhelmingly positive — and their concept is really starting to catch on across the country. In fact, this company is on the precipice of redefining the entire footwear industry thanks to a new type of shoe that has two (2) interchangeable sections.

Both men and women can buy one “bone” as they call it, which is a specially-fitted sole of the shoe. Then, you can apply any number of “skins,” which are the decorative and stylish outside of the shoe to match any attire. The idea is that once you have a comfortable bone, you can then dress the outside look of the shoe in any way that you want — giving you multiple looks all contained in the same comfortable pre-fit sole.

Folks, can you imagine if this concept takes off? Speaking as the father of three girls (who are the proud owners of countless pairs of shoes), this must be one of the greatest ideas in footwear I’ve ever seen. No longer do you have to worry about uncomfortable shoes that don’t match a certain outfit or occasion. Just apply any number of skins to your comfortable bone and you’ll be all set!

In fact, when I told my wife about these shoes, it was like pouring gas on a fire. She had to have them. So we went out and bought ourselves each a pair. And I must tell you, we absolutely love them. The bone incorporates special holistic orthopedic support, which ensures a perfect fit. And from there, we added a few skins to form multiple style variations from the same pair of quality bones. No matter which skins we added, you always have the same perfect feel and fit. Can you imagine the money that could be made on this one?

And here’s the exciting part: This company is getting ready to roll out these “skins and bones” this fall. That means we’re jumping on this little gem at exactly the right time. As Bryan will outline below, the handful of stores that are carrying these shoes are selling them like hotcakes. Retailers simply cannot keep them in stock! In fact, when I mentioned this company to Bryan, he responded “Mark, this could be the next Crocs.” I could not agree more, especially leading right into the holiday buying season.

This company is called Skins (SKNN.OB) and the stock is only trading for $1.60 per share. Without exaggeration, this one has explosive upside potential. I’m talking 10 to 1 returns here, so let’s buy the stock anywhere under $1.75 and ride the upside momentum as this new footwear fad takes off. I’ll let Bryan fill you in on the rest of the exciting details, but first some updates:

UPDATES

Raptor Networks Technology (RPTN.OB): Do not underestimate this stock. Their switching technology is faster, more compact, and more cost-effective than Cisco (CSCO – NASDAQ). They are ramping up their sales force both here and overseas, and over the next 1-2 years, we could indeed see a gain of 800% or more. I kid you not.

Minera Andes (MNEAF.OB): If the Fed cuts interest rates this month, that’ll be an enormous upside trigger for both gold and silver. Plus, we’re now entering a period where metals typically out-performs the broad-based markets, so the timing looks good for MNEAF. The company just announced that they’re doubling production, so I expect to see the stock moving up in Q4.

Cereplast (CERP.OB): With more and more problems with toys from China, I have no doubt this play is ready to blast off. Patience will pay off handsomely on this one, especially because it sold off last week — but then bounced back just as quickly. With that type of support base, I want to be sure that we’re holding.

US Geothermal (UGTH.OB): We are getting very close to production time, so we should be in very fine shape by the end of the year. It looks to me like UGTH is about to break out to new highs, so as Bryan says in his options trading alerts, “Get ready to lock and load!”

Metalline Mining (MMG – AMEX): They just issued an update on their progress, and one of their biggest problems (which is water) has now been overcome. When it comes to mining companies, water can make or break them — and now that MMG has solved this issue, they’re moving quickly towards production.

Basin Water (BWTR – NASDAQ): This week, BWTR announced the purchase of Mobile Process Technology Company, an acquisition that helps them expand into in the municipal drinking water treatment market. Folks, this is exactly why we want to own this company. Water is becoming a sought after commodity, and BWTR is positioned to grow very quickly. Within the next 6 months, we could have a $25.00 stock on our hands, so this is another “must own” company.

Sinovac Biotech (SVA – AMEX): Last week’s pick has already shown its strength, as it rallied earlier this week on a big market down-day. I believe that Wall Street is looking over our shoulder, and I hope all of you were able to buy some shares. Everyone in the medical field I’ve consulted with agrees that we need more flu vaccines right now, so the future looks very promising for SVA.

On that note, have a good week and we’ll talk again next Friday.

Sincerely,

Trading for Only $1.60 Per Share, Could Skins (SKNN.OB) be the Next Crocs (CROX – NASDAQ)?

If So, Then 300% in 12 Months Is a Lock

The investing thesis on Skins (SKNN.OB) is rather simple.

First, you have a company that is offering a unique and innovative product. Their patented two-part, interchangeable footwear structure — consisting of an outer collapsible “skin” and an inner holistic orthopedic support section called the “bone” — is a paradigm-shifting solution that offers customers something they’ve always wanted in shoes: comfort and style.

Second, you have a company implementing the beginning stages of a winning business plan, and their all-important “market acceptance” testing phase was just proven to be a success. For example, starting earlier this year, Skins’ launched their spring collection to a small number of high-end retail stores throughout the U.S. to gauge the customer responsiveness to their product. This targeted launch was just completed, and the conclusion was that their product was a rousing success. (As you’ll see below, the small number of stores carrying Skins cannot keep them in stock.) Now that they’ve proven that there is strong market demand for their product, the next step is to exponentially grow their sales by targeting select department stores and retail chains. And this next expansion step will begin in the fall of 2007. That’s right now! And after that, the company plans an aggressive international distribution.

And third, you have the opportunity to buy shares in this company for only $1.60! It’s a remarkable opportunity to own this game-changing footwear company in the beginning stages of their growth cycle — putting yourself in incredible position to handsomely profit as the collapsible and interchangeable skin and the highly engineered and flexible bone take America by storm.

Make no mistake: You probably wouldn’t expect to hear this, but past history shows that Wall Street absolutely loves innovative footwear companies. It’s a proven fact that Wall Street typically assigns these stocks very high earnings multiples that handsomely reward early shareholders. For example, let’s look at CROCS (CROX – NASDAQ).

Currently trading for $55.87 per share, Crocs has trailing three month revenues of $590.53 million and a market cap of $4.58 billion. Their quarterly revenue growth of 161.90% has helped Wall Street assign them a lavish trailing P/E multiple of 40.72. Perhaps that’s too high for a shoe manufacturer, but the point is that Wall Street loves explosive growth — no matter what industry or sector it’s coming from. And most importantly, CROX has gained 300% since their IPO in February of 2006. Wow!

But Crocs isn’t the only example. Also consider Heelys (HLYS – NASDAQ), the maker of the special shoes you see kids wearing with the wheel in the heel of the shoe. With trailing three month revenues of $267 million and a market cap of $243.56 million, Heelys currently trades for $9.12 per share (and that’s down from their $30.00 IPO price in December of 2006). So as you can see, Wall Street has no problem assigning bloated valuations to specialty footwear stocks. That’s why Mark and I both feel that we’ve truly uncovered a hidden small-cap gem that’s about to explode.

You see, Crocs are currently being sold in 11,000 store locations in the United States. And on the same token, Heelys are available in sporting goods stores nationwide and in 50 countries around the world.

Skins, on the other hand, are currently sold in only 30 high-end retailers in the U.S.

That’s a clear illustration of the enormous potential of this investment. And that’s the thing. Considering the overwhelmingly positive market response to their spring test-launch, Skins won’t be available in only 30 retail stores for long. Case in point, just listen to what some of the current store owners who are selling Skins have said:

I specifically chose to end with a quote from the president and owner of Sportie LA because many retail experts consider Los Angeles to be a model for success across the nation. If your product sells in LA, for example, the odds are strong that it’ll catch on nationally (if not globally). Having said that, consider this: Sportie LA simply cannot keep Skins in stock. According to their Web site, here are the styles and sizes of Skins that are completely sold out:

Woman’s Shoes

• April White/Denim Size 8
• Ana White/Sunflower Size 6,8
• April White/Cappucino Size 6,7,8,9,10
• April Black Size 8,9,10
• Brodie Grey Size 9
• Alexis Espresso/Tan Size 8,9,10
• Hailey Cappucino Size 8
• Ana Expresso/Tan Size 10

Men’s Shoes

• Gus Grey Size 9,10,11
• Gus Black Size 8,10,11
• Harry Black Size 8,10,11,12,13
• Evan White Size 10

Based on these impressive sales, Skins is about to aggressively launch their fall/winter 2007 debut collection on the market. And playing off their collapsible outer skin design, they’ve developed a sleek marketing campaign aimed at “the flexible lifestyle.” The ad images (pictured below) will consist of clean silhouettes inspired by an elegant and casual palette.

Looking at their product line, you’ll see that they offer shoe variations that will appeal to both men and women.

For men: Sleek sneakers are made of supple leather and suede, and their Velcro closures and lace-ups come in a variety of rich hues from chocolate brown to gunmetal grey.

For women: The classic “ballet flat” is quickly becoming a staple for every women’s shoe closet, and Skins offers a variety of selections with eye-catching intricacies such as antiqued gold buckles, treated metallic leathers, and herringbone details.

For their full footwear portfolio, visit their Web site: http://www.skinsfootwear.com

With a winning and innovate product about to begin its major commercial launch, I feel that Skins offers an explosive investment opportunity with little downside risk. After all, 30 stores selling their product can quickly expand into 200 stores in a month…and up to 1,700 stores by the end of the quarter, leading to uncommon returns for early shareholders. Just imagine if Nordstrom, Bloomingdales, Macys, Neiman Marcus, or Saks decides to sell Skins. Their sales could ramp up like never before.

Not only that, but a quick look at the recent Bloomingdales catalog shows brands like Stuart Weitzman selling one pair of women’s shoes for $315. Taryn Rose sells shoes for $415, and Juicy Couture is around $285. With the initial pricing of $49.95 per bone, Skins look poised and ready to capture this high-end market by offering literally 3-4 different shoe designs for the same price as one name-brand model. To me, the choice is clear. There’s a new shift taking place in the footwear market, and Skins is leading the innovation. As a small-cap investor with an appetite for explosive potential, we definitely want to be along for the ride.

PLAY: Buy shares of Skins (SKNN.OB) at or under $1.75, good for the week.

Sincerely,